Islamic Laws on Riba (Interest) and Their Economoic Implications

Abstract

The Islamic fundamentalist doctrine on riba states that the rate of interest is zero, a doctrine based upon the Quranic injunctions against it. The word ‘riba’ means ‘increase’ as interpreted by Imam Razi, which corresponds to the word ‘interest’ as defined by Webster's New World Dictionary. In both cases the increase refers to the amount beyond what is owed. Thus, the strictest interpretation that can be given to the word riba is that it means interest—an amount, or rate, due above the principal of a loan. The word riba, however, is commonly translated as usury which is defined by Webster's Dictionary as “an excessive or unlawfully high rate or amount of interest.” Thus, the fundamental aspect of the controversy about the doctrine of interest in Islam is whether the rate of interest is zero, in which case riba is interpreted to mean interest per se, or whether a positive rate of interest is permissible, in which case nba is interpreted to mean usury.

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